Fortune 500 Top 20

Given the sluggish recovery and a strapped consumer, you’d expect to see corporate America trudging along, not racing for glory. In fact, the Fortune 500 are thriving as a group. Unlike the U.S. economy, they’ve shown quicksilver agility, rapidly shifting their product mix and producing more goods at little new cost. This nimbleness belies the immense size of these companies and, frequently, their advanced age.

The Fortune 500 generated a total of $824.5 billion in earnings last year, up 16.4% over 2010. That beats the previous record of $785 billion, set in 2006 during a roaring economy. The 2011 profits are outsized based on two key historical metrics. They represent 7% of total sales, vs. an average of 5.14% over the 58-year history of the Fortune 500. Companies are also garnering exceptional returns on their capital. The 500 achieved a return-on-equity of 14.3%, far above the historical norm of 12%.

Looking deeper into the list, several macro trends emerge. High prices at the pump translated into great results for energy companies like Exxon Mobil, which topped the Fortune 500 with $453 billion in revenues. Your friends on Wall Street may be complaining about smaller bonuses, but financial services are experiencing a comeback of sorts. For 2011, the sector posted $150 billion in earnings, up 19% over 2010. The financial sector also saw a revival in the fortunes of the big commercial banks. Meanwhile, technology wasn’t quite the profit machine that it’s been in past years. Sector earnings rose by just $5 billion, although tech remains the largest profit-maker at $156 billion, narrowly edging the resurgent financials.

These big numbers can’t last. The gravitational pull of the business cycle will eventually end the profit bonanza, in part because many companies carried out brutal layoffs during the recession and will now be forced to hire more workers to maintain their growth. So let’s enjoy it as a heroic but fleeting moment, not a durable new age.

It’s tough to beat the kind of year Exxon Mobil had in 2011. Shares rose by 20% and profits surged by 35% to $41.1 billion. Revenues jumped 28% to $452.9 billion, helping Exxon reclaim the top spot in the Fortune 500.

Exxon has certainly benefited from rising oil prices, particularly during the last quarter of 2011. But the company has also positioned itself well to capitalize on the latest controversial trend in domestic energy production: Fracking. Exxon now produces just about as much gas as it does oil, thanks to its $35 billion purchase of XTO Energy in 2010. As CEO Rex Tillerson told Fortune recently, with world demand for energy expected to rise considerably during the coming decades, the shale gas party has just begun.

Wal-Mart slipped to No. 2 in the Fortune 500 in 2011 after holding onto the top spot for two years in a row. The retailer was forced to aggressively cut prices to reverse its declining same store sales in the U.S. That helped push revenues up by 6% during 2011, to $447 billion, but it hurt Wal-Mart’s bottom line -- profits declined by 4.6% during the year, to $15.7 billion.

The world’s largest retailer has struggled to maintain growth at its U.S. stores, even as the economy has shown signs of recovery. Although the unemployment rate has fallen, the housing market remains unstable and consumer spending hasn’t reflected a new attitude for many Americans.

Wal-Mart’s international business continues to be a source of growth for the company -- revenues outside the U.S. rose by 13.1% last year, to $35.5 billion. But one key growth market for Wal-Mart, Mexico, recently hit a major roadblock after a sweeping New York Times story reported bribery allegations by the retailer there.

Chevron ended 2011 on a sour note: Despite rising oil prices, the company posted its biggest profit decline in two years, largely due to losses at its U.S. refinery business. Still, the second-largest oil and gas company in the U.S. managed to post a 25% increase in revenues during the full year, to $245.6 billion, and an impressive 41% jump in profits, to $26.9 billion. Chevron is spending heavily on oil and gas projects in places like Australia, Africa, and the Gulf of Mexico -- projects that are expected to start paying off in 2014.

Chevron also continues to keep its lawyers gainfully employed. In addition to multiple ongoing legal battles, including a longstanding one in Ecuador, Chevron is now fighting an $11 billion suit brought against it for an oil spill late last year in Brazil. It’s also still cleaning up after a natural gas rig in Nigeria exploded earlier this year.

Big Oil may be getting a little smaller. ConocoPhillips surprised many on Wall Street last year when it announced plans to break up into two publicly traded companies, one focused on exploration and production and another on refineries and marketing, called Phillips 66. The spin-off happened on April 30. Conoco officials hope the break-up will help it compete better internationally and unlock value by attracting more investors.

This Fortune 500 list was based on 2011 results, so the new changes for ConocoPhillips shareholders aren’t reflected here. If they were, we’d see Phillips 66 in the No. 4 spot instead of the parent company, ConocoPhillips. The spin-off represents about 80% of the original company’s total 2011 revenue -- that still puts it ahead of the next company on this list, General Motors.

Detroit has staged a comeback, and so has General Motors. The auto giant jumped three spots in the Fortune 500, from No. 8 in 2010 to No. 5 last year. Just two years after it filed for bankruptcy and received federal aid, GM posted record profits in 2011. It earned $9.2 billion, up a whopping 49% from 2010, while revenues rose 11% to $150.3 billion. GM also reclaimed its title as global sales leader after Toyota nabbed it from GM in 2008.

No one should be more pleased by those numbers than GM union workers, who negotiated a profit-sharing program as part of the company’s reorganization. About 47,500 workers received checks averaging $7,000, up from $4,300 in 2010.6. General Electric

General Electric managed to post strong earnings growth in 2011, despite a slight drop in revenues. Earnings rose 21% to $14.2 billion, while sales fell 2.6% to $147.6 billion. Despite that dip in sales, GE CEO Jeffrey Immelt said the company’s performance at the end of the year bodes well for 2012, as orders picked up in businesses ranging from energy infrastructure to health care.

Analysts remain focused on GE’s industrial division, which has struggled to grow since the economy fell into recession. The company reported a record backlog of orders at the end of the year -- $200 billion, up from $191 billion. Immelt says that gives GE a strong start to its goal of growing industrial earnings by 10%.

Berkshire Hathaway had its share of setbacks in 2011, but CEO Warren Buffett was still able to say that his company’s book value growth handily outperformed the S&P 500. It was the 39th year he was able to make such a claim. Berkshire shareholders, on the other hand, underperformed the broader market in 2011 with their investment in the Omaha, Nebraska-based holding company.

Earnings fell by 20.9% at Berkshire in 2011, thanks in part to high catastrophe losses in its insurance business and continued sluggishness in its housing-related businesses. Total revenues rose by 5.5% to $143.7 billion. Buffett called out five businesses for their particularly strong performance, which he expects will continue to post profit growth in 2012: BNSF, Iscar, Lubrizol, Marmon Group, and MidAmerican Energy.

Last year, Fannie Mae catapulted from No. 81 on the Fortune 500 to No. 5, thanks to new accounting rules. On this year’s list, the government-controlled mortgage giant slipped to No. 8 after revenues fell by more than 10% to $137.5 billion. Losses for the year grew to $16.9 billion from $14 billion in 2010.

Fannie Mae continues to be dragged down by its portfolio of loans dating back to the pre-housing crash heyday. The lender has borrowed $116 billion from the government so far, and at the end of last year it sought an additional $4.6 billion to help cover its operating losses. It’s difficult to see a turnaround on the horizon.

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